Shutterstock Inc., a digital content licensing platform, has agreed to pay $35 million to resolve allegations from the Federal Trade Commission (FTC) concerning unfair subscription and cancellation practices. The FTC charged Shutterstock with billing customers without informed consent, failing to clearly disclose automatic renewals and cancellation fees, and making subscription cancellations difficult.
Since at least 2020, Shutterstock has offered most of its stock photos, videos, and other digital content through subscription plans allowing users to download specified content monthly under a license. The company sells subscriptions via its website and through advertisements, offering various plans, including annual paid-up-front (APU), annual paid monthly (APM), and on-demand “packs.”
According to the FTC’s complaint, Shutterstock marketed on-demand packs as suitable for one-time projects with no commitments but did not adequately disclose that these packs automatically renewed after the last download was used and, until early 2024, also renewed automatically after one year. The FTC also alleged that during the APM enrollment process, Shutterstock often failed to clearly disclose material terms such as automatic renewal at each year’s end and fees charged for early cancellation. Instead, crucial details were hidden in difficult-to-access fine print.
The complaint identified several violations: Shutterstock did not clearly and conspicuously disclose renewal terms and cancellation fees before billing customers, failed to secure consumers’ express informed consent prior to charging their credit cards, and made cancellation burdensome by requiring consumers to contact support via phone, chat, or email rather than providing a simple online cancellation option.
Under the FTC’s proposed order, Shutterstock must provide full monetary relief to affected consumers and improve its subscription practices. The order bars Shutterstock from misrepresenting subscription terms, mandates clear disclosure of all material terms, requires express informed consent before charging, and obligates the company to maintain straightforward cancellation methods for subscription services.
The FTC’s enforcement action reflects the agency’s focus on ensuring transparency and fairness in digital subscription models, which have become widespread across industries. The complaint and proposed settlement were filed in the U.S. District Court for the Southern District of New York, with the Commission’s vote to proceed unanimous.
Why it matters
This settlement highlights ongoing regulatory scrutiny of subscription-based business models, emphasizing the need for clear consumer disclosures and easy cancellation to protect consumer choice and promote fair competition. Misleading or obscure subscription terms can lead to unauthorized charges and reduced consumer trust, issues the FTC aims to address through enforcement.
Background
Negative option billing, where consumers are charged automatically unless they cancel, is common in digital subscriptions. The FTC has previously targeted companies that fail to obtain informed consent or disclose renewal terms sufficiently, as these practices can trap consumers into unwanted charges. Shutterstock’s case underscores challenges in regulating subscription services that use fine print or complicated cancellation processes to maximize revenue at the expense of consumer rights.
Sources
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